Oil prices rose on Wednesday after US President Donald Trump announced at the NATO summit in Ankara that he was ending the ceasefire with Iran following the resumption of hostilities in the Strait of Hormuz.
Oil prices surged by over 6%, and global stock markets fell on Wednesday after the US President’s announcement.
The price of Brent crude, the global benchmark, jumped to $78.93 per barrel shortly after 05:00 (US East Coast time), recording an increase of approximately 6.4% during the day. Its American counterpart, West Texas Intermediate (WTI) - for August delivery - rose by 6.5%, reaching $74.99 per barrel, as reported by CNN.
These increases come after weeks of price declines, amid hopes that the United States and Iran could reach an agreement to reopen the Strait of Hormuz, through which approximately a fifth of the world's oil supply transits before the war.
However, oil prices remain well below the peak levels reached during the war - over $120 per barrel for Brent - but these increases could be enough to reignite fears of inflation, as noted by the source.
Stock markets recorded sharp declines. Futures contracts for the Dow and Nasdaq indices fell by 1.3% and 1.6%, respectively, while S&P 500 futures contracts dropped by 1%.
Major European stock indices fell by approximately 2%. In Asia, South Korea's KOSPI index closed down by 5.4%, and Japan's Nikkei index lost 2.1% at the close.
On the other hand, Hong Kong's Hang Seng index rose by 3%.
"Sentiment in the stock market is under new pressure due to the rise in oil prices," wrote Neil Wilson, a strategist at the investment bank Saxo, in an informative note. "It is clear that higher oil prices fuel fears of stagflation and affect economic growth prospects," he added.
The term "stagflation" refers to an undesirable combination of high inflation and low economic growth.
T.D.